ZTO Express (Cayman) (ZTO) 6-K/A Management’s Discussion and Analysis of Financial Condition and Results of Operations

Exhibit 99.2​

ZTO EXPRESS (CAYMAN) INC.

INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

​	Page
Unaudited Interim Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2022	​	F-2
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income for the Six Months Ended June 30, 2021 and 2022	​	F-4
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2021 and 2022	​	F-5
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2022	​	F-7
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	​	F-8

F-1

ZTO EXPRESS (CAYMAN) INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2021 AND JUNE 30, 2022
(Amounts in thousands, except for share and per share data)

​	Notes	As of December 31, 2021		As of June 30, 2022
​	​	RMB		RMB			US$ (Note 2)
Assets	​	​	​	​	​	​	​	​
Current assets	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	​	9,721,225	​	​	9,927,765	​	1,482,176
Restricted cash	​	​	27,736	​	​	384,912	​	57,466
Accounts receivable, net	​	​	933,444	​	���	852,754	​	127,313
Financing receivables, net	​	​	1,111,461	​	​	939,689	​	140,292
Short-term investment	​	​	2,845,319	​	​	5,211,019	​	777,985
Inventories	​	​	82,961	​	​	28,746	​	4,292
Advances to suppliers	​	​	667,855	​	​	960,354	​	143,377
Prepayments and other current assets	​	​	3,142,368	​	​	2,738,674	​	408,873
Amounts due from related parties	8	​	133,990	​	​	133,362	​	19,910
Total current assets	​	​	18,666,359	​	​	21,177,275	​	3,161,684
Investments in equity investees	​	​	3,730,448	​	​	3,893,799	​	581,329
Property and equipment, net	3	​	24,929,897	​	​	26,848,485	​	4,008,373
Land use rights, net	​	​	5,335,549	​	​	5,437,844	​	811,849
Intangible assets, net	​	​	35,634	​	​	32,536	​	4,857
Operating lease right-of-use assets	​	​	897,238	​	​	810,107	​	120,946
Goodwill	​	​	4,241,541	​	​	4,241,541	​	633,245
Deferred tax assets	5	​	934,848	​	​	900,669	​	134,466
Long-term investment	​	​	1,214,500	​	​	2,360,500	​	352,413
Long-term financing receivables, net	​	​	1,412,956	​	​	1,514,933	​	226,174
Other non-current assets	​	​	762,273	​	​	656,721	​	98,046
Amounts due from related parties-non current	8	​	611,100	​	​	631,620	​	94,298
TOTAL ASSETS	​	​	62,772,343	​	​	68,506,030	​	10,227,680
LIABILITIES AND EQUITY	​	​	​	​	​	​	​	​
Current liabilities (including amounts of the consolidated VIE without recourse to ZTO Express (Cayman) Inc. See Note 2(b))	​	​	​	​	​	​	​	​
Short-term bank borrowings	4	​	3,458,717	​	​	7,059,620	​	1,053,974
Accounts payable	​	​	1,957,529	​	​	1,910,929	​	285,294
Notes payable	​	​	174,920	​	​	245,000	​	36,578
Advances from customers	​	​	1,226,549	​	​	1,406,445	​	209,977
Income tax payable	​	​	86,789	​	​	145,728	​	21,757
Amounts due to related parties	8	​	22,786	​	​	43,890	​	6,553
Operating lease liabilities, current	​	​	250,995	​	​	218,634	​	32,641
Acquisition consideration payable	​	​	22,942	​	​	—	​	—

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-2

​	Notes	As of December 31, 2021		As of June 30, 2022
​	​	RMB		RMB		US$ (Note 2)
Dividends payable	​	​	708	​	15,712	​	2,346
Other current liabilities	​	​	5,794,380	​	5,931,378	​	885,528
Total current liabilities	​	​	12,996,315	​	16,977,336	​	2,534,648
Deferred tax liabilities	5	​	292,356	​	272,399	​	40,668
Non-current operating lease liabilities	​	​	556,091	​	518,552	​	77,418
TOTAL LIABILITIES	​	​	13,844,762	​	17,768,287	​	2,652,734
Commitments and contingencies (Note 9)	​	​	​	​	​	​	​
Shareholders’ equity	​	​	​	​	​	​	​
Ordinary shares (US$0.0001 par value; 10,000,000,000 shares authorized; 826,943,309 shares issued and 808,448,289 shares outstanding as of December 31, 2021; 826,943,309 shares issued and 809,733,116 shares outstanding as of June 30, 2022)	​	​	535	​	535	​	80
Additional paid-in capital	​	​	28,229,026	​	27,090,866	​	4,044,560
Treasury shares, at cost (11,683,474 and 11,185,518 shares as of December 31, 2021 and June 30, 2022, respectively)	​	​	(2,067,009)	​	(1,977,983)	​	(295,305)
Retained earnings	​	​	22,716,799	​	25,361,886	​	3,786,430
Accumulated other comprehensive loss	​	​	(242,104)	​	(156,961)	​	(23,434)
ZTO Express (Cayman) Inc. shareholders’ equity	​	​	48,637,247	​	50,318,343	​	7,512,331
Non-controlling interests	​	​	290,334	​	419,400	​	62,615
Total Equity	​	​	48,927,581	​	50,737,743	​	7,574,946
TOTAL LIABILITIES AND EQUITY	​	​	62,772,343	​	68,506,030	​	10,227,680

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-3

ZTO EXPRESS (CAYMAN) INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

​	​	Six months ended June 30,
​	Notes	2021		2022
​	​	RMB		RMB		US$ (Note 2)
Revenues (including related party revenue of RMB28,357 and RMB561,809 for the six months ended June 30, 2021 and 2022, respectively)	​	​	13,797,597	​	16,560,727	​	2,472,451
Cost of revenues (including related party cost of revenues of RMB199,982 and RMB260,663 for the six months ended June 30, 2021 and 2022, respectively)	​	​	(11,027,422)	​	(12,738,426)	​	(1,901,797)
Gross profit	​	​	2,770,175	​	3,822,301	​	570,654
Operating (expenses)/income	​	​	​	​	​	​	​
Selling, general and administrative	​	​	(1,014,230)	​	(1,075,106)	​	(160,509)
Other operating income, net	​	​	332,590	​	354,612	​	52,942
Total operating expenses	​	​	(681,640)	​	(720,494)	​	(107,567)
Income from operations	​	​	2,088,535	​	3,101,807	​	463,087
Other income/(expenses)	​	​	​	​	​	​	​
Interest income	​	​	177,882	​	229,588	​	34,277
Interest expense	​	​	(49,380)	​	(82,737)	​	(12,352)
Gain/(loss) from fair value changes of financial instruments	​	​	48,130	​	(14,456)	​	(2,158)
Foreign currency exchange (loss)/gain	​	​	(26,084)	​	106,940	​	15,966
Income before income tax and share of loss in equity method investments	​	​	2,239,083	​	3,341,142	​	498,820
Income tax expense	5	​	(404,497)	​	(693,424)	​	(103,525)
Share of loss in equity method investments	​	​	(28,835)	​	(13,492)	​	(2,014)
Net income	​	​	1,805,751	​	2,634,226	​	393,281
Net loss attributable to non-controlling interests	​	​	20,046	​	77,225	​	11,529
Net income attributable to ZTO Express (Cayman) Inc.	​	​	1,825,797	​	2,711,451	​	404,810
Net income attributable to ordinary shareholders	​	​	1,825,797	​	2,711,451	​	404,810
Net earnings per share attributable to ordinary shareholders	7	​	​	​	​	​	​
Basic	​	​	2.21	​	3.35	​	0.5
Diluted	​	​	2.21	​	3.35	​	0.5
Weighted average shares used in calculating net earnings per ordinary share	​	​	​	​	​	​	​
Basic	​	​	827,755,090	​	809,214,926	​	809,214,926
Diluted	​	​	827,755,090	​	809,214,926	​	809,214,926
Net income	​	​	1,805,751	​	2,634,226	​	393,281
Other comprehensive (loss)/income, net of tax of nil	​	​	​	​	​	​	​
Foreign currency translation adjustment	​	​	(84,260)	​	85,143	​	12,712
Comprehensive income	​	​	1,721,491	​	2,719,369	​	405,993
Comprehensive loss attributable to non-controlling interests	​	​	20,046	​	77,225	​	11,529
Comprehensive income attributable to ZTO Express(Cayman) Inc.	​	​	1,741,537	​	2,796,594	​	417,522

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-4

ZTO EXPRESS (CAYMAN) INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

​	ZTO EXPRESS (CAYMAN) INC. Shareholders’ Equity															​	​	​	​
​	Ordinary shares				Additional paid-in capital		Treasury shares, at cost		Retained earnings		​	Accumulated other comprehensive loss		Total		Non-controlling interests		Total Equity
​	Number of outstanding shares		RMB		RMB		RMB		RMB		​	RMB		RMB		RMB		RMB
Balance at January 1, 2021	​	828,869,972	​	553	​	30,613,948	​	(2,578,870)	​	21,038,753	​	​	(95,571)	​	48,978,813	​	120,885	​	49,099,698
Net income/(loss)	​	—	​	—	​	—	​	—	​	1,825,797	​	​	—	​	1,825,797	​	(20,046)	​	1,805,751
Foreign currency translation adjustments	​	—	​	—	​	—	​	—	​	—	​	​	(84,260)	​	(84,260)	​	—	​	(84,260)
Acquisition of non-controlling interests of subsidiaries	​	—	​	—	​	(16,301)	​	—	​	—	���	​	—	​	(16,301)	​	(47,028)	​	(63,329)
Share-based compensation and ordinary shares issued for share- based compensation	​	1,161,362	​	—	​	229,052	​	49,496	​	(30,521)	​	​	—	​	248,027	​	—	​	248,027
Repurchase of ordinary shares	​	(3,028,386)	​	—	​	—	​	(549,985)	​	—	​	​	—	​	(549,985)	​	—	​	(549,985)
Non-controlling interest recognized from partial disposal	​	—	​	—	​	1,850	​	—	​	—	​	​	—	​	1,850	​	11,083	​	12,933
Capital contribution from non-controlling interest holders	​	—	​	—	​	—	​	—	​	—	​	​	—	​	—	​	44,541	​	44,541
Distribution of dividends	​	—	​	—	​	(1,345,157)	​	—	​	—	​	​	—	​	(1,345,157)	​	—	​	(1,345,157)
Cancellation of ordinary shares	​	—	​	(7)	​	(387,311)	​	1,060,855	​	(673,537)	​	​	—	​	—	​	—	​	—
Balance at June 30, 2021	​	827,002,948	​	546	​	29,096,081	​	(2,018,504)	​	22,160,492	​	​	(179,831)	​	49,058,784	​	109,435	​	49,168,219

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-5

ZTO EXPRESS (CAYMAN) INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022 (CONTINUED)
(Amounts in thousands, except for share and per share data)

​

ZTO EXPRESS (CAYMAN) INC. Shareholders’ Equity

​

​

​

​

​

Ordinary shares

Additional paid-in capital

Treasury shares, at cost

​

Retained earnings

Accumulated other comprehensive (loss)/income

Total

Non-controlling interests

Total Equity

​

Number of outstanding shares

RMB

RMB

RMB

​

RMB

RMB

RMB

RMB

RMB

Balance at January 1, 2022

​

808,448,289

​

535

​

28,229,026

​

(2,067,009)

��

​

22,716,799

​

(242,104)

​

48,637,247

​

290,334

​

48,927,581

Net income/(loss)

​

—

​

—

​

—

​

—

​

​

2,711,451

​

—

​

2,711,451

​

(77,225)

​

2,634,226

Foreign currency translation adjustments

​

—

​

—

​

—

​

—

​

​

—

​

85,143

​

85,143

​

—

​

85,143

Acquisition of non-controlling interests of subsidiaries

​

—

​

—

​

(5,060)

​

—

​

​

—

​

—

​

(5,060)

​

(34,069)

​

(39,129)

Share-based compensation and ordinary shares issued for share based compensation

​

1,284,827

​

—

​

156,318

​

89,026

​

​

(66,364)

​

—

​

178,980

​

—

​

178,980

Non-controlling interest recognized from partial disposal

​

—

​

—

​

—

​

—

​

​

—

​

—

​

—

​

49,159

​

49,159

Capital contribution from non-controlling interest holders

​

—

​

—

​

—

​

—

​

​

—

​

—

​

—

​

191,201

​

191,201

Distribution of dividends

​

—

​

—

​

(1,289,418)

​

—

​

​

—

​

—

​

(1,289,418)

​

—

​

(1,289,418)

Balance at June 30, 2022

​

809,733,116

​

535

​

27,090,866

​

(1,977,983)

​

​

25,361,886

​

(156,961)

​

50,318,343

​

419,400

​

50,737,743

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-6

ZTO EXPRESS (CAYMAN) INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

​	Six months ended June 30,
​	2021		2022
​	RMB		RMB		US$ (Note 2)
Cash flows from operating activities	​	​	​	​	​	​
Net cash provided by operating activities	​	2,409,357	​	4,886,147	​	729,483
Cash flows from investing activities	​	​	​	​	​	​
Purchases of property and equipment	​	(3,960,992)	​	(3,243,620)	​	(484,260)
Purchases of land use rights	​	(544,074)	​	(93,018)	​	(13,887)
Investments in equity investees	​	(185,187)	​	(85,000)	​	(12,690)
Purchases of short-term investments	​	(10,477,021)	​	(4,608,177)	​	(687,983)
Maturity of short-term investments	​	11,050,276	​	2,254,609	​	336,604
Purchases of long-term investment	​	(305,000)	​	(1,430,000)	​	(213,493)
Maturity of long-term investment	​	—	​	284,000	​	42,400
Loan to employees	​	(237,315)	​	(58,893)	​	(8,792)
Others	​	102,855	​	55,730	​	8,320
Net cash used in investing activities	​	(4,556,458)	​	(6,924,369)	​	(1,033,781)
Cash flows from financing activities	​	​	​	​	​	​
Proceeds from short-term borrowing	​	3,360,405	​	4,594,520	​	685,944
Repayment of short-term borrowing	​	(1,401,862)	​	(1,040,457)	​	(155,336)
Repurchase of ordinary shares	​	(549,985)	​	—	​	—
Proceeds from non-controlling interest recognized from partial disposal	​	12,933	​	26,217	​	3,914
Proceeds from capital contribution from non-controlling interest shareholder	​	44,541	​	191,201	​	28,545
Payment of dividends	​	(1,352,241)	​	(1,308,611)	​	(195,370)
Others	​	(63,329)	​	(39,357)	​	(5,876)
Net cash provided by financing activities	​	50,462	​	2,423,513	​	361,821
Effect of exchange rate changes on cash, cash equivalents and restricted cash	​	(100,613)	​	172,835	​	25,803
Net change in cash, cash equivalents and restricted cash	​	(2,197,252)	​	558,126	​	83,326
Cash, cash equivalents and restricted cash at beginning of period	​	14,360,092	​	9,769,361	​	1,458,527
Cash, cash equivalents and restricted cash at end of period	​	12,162,840	​	10,327,487	​	1,541,853

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.

​	As of June 30,
​	2021		2022
​	RMB		RMB		US$ (Note 2)
Cash and cash equivalents	​	12,098,453	​	9,927,765	​	1,482,176
Restricted cash	​	51,716	​	384,912	​	57,466
Restricted cash, non-current(1)	​	12,671	​	14,810	​	2,211
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	​	12,162,840	​	10,327,487	​	1,541,853

Note: (1) The non-current restricted cash is included in other non-current assets on the unaudited interim condensed consolidated balance sheets.

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

F-7

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

1. Organization and Principal Activities

ZTO Express (Cayman) Inc. (“ZTO”) was incorporated under the laws of Cayman Islands on April 8, 2015. ZTO, its subsidiaries and its variable interest entity and subsidiaries of variable interest entity (“VIE”) (collectively also referred to as the “Company”) are principally engaged in express delivery services in the People’s Republic of China (the “PRC”) through a nationwide network partner model.

2. Summary of Significant Accounting Policies

(a) Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. The accompanying unaudited interim condensed consolidated financial statements include the financial information of the Company. All intercompany balances and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and U.S. generally accepted accounting standards for interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements, accounting policies and notes thereto included in the Company’s audited consolidated financial statements for the year ended December 31, 2021. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results for the full years.

In the opinion of the management, the accompanying unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited interim condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2021. The financial information as of December 31, 2021 presented in the unaudited interim condensed consolidated financial statements is derived from the audited consolidated financial statements for the year ended December 31, 2021.

(b) Principles of consolidation

The unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and VIE. All intercompany transactions and balances have been eliminated on consolidation.

The Company evaluates the need to consolidate its VIE of which the Company is the primary beneficiary. In determining whether the Company is the primary beneficiary, the Company considers if the Company (1) has power to direct the activities that most significantly affects the economic performance of the VIE, and (2) The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. If deemed the primary beneficiary, the Company consolidates the VIE.

F-8

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

2. Summary of Significant Accounting Policies (Continued)

(b) Principles of consolidation (Continued)

Consolidation of Variable Interest Entity

The amounts and balances of ZTO Express and its subsidiaries (the “VIE”) after the elimination of intercompany balances and transactions within the VIE are presented in the following table:

​	As of December 31, 2021		As of June 30, 2022
​	RMB		RMB		US$
Assets	​	​	​	​	​	​
Current assets:	​	​	​	​	​	​
Cash and cash equivalents	​	930,942	​	1,070,419	​	159,809
Accounts receivable, net	​	671,277	​	561,073	​	83,766
Financing receivables, net	​	977,920	​	803,412	​	119,946
Short-term investment	​	320,000	​	670,000	​	100,028
Inventories	​	30,214	​	21,989	​	3,283
Advances to suppliers	​	55,013	​	55,984	​	8,358
Prepayments and other current assets	​	1,924,196	​	1,393,637	​	208,065
Amounts due from related parties(1)	​	440,190	​	5,868,997	​	876,218
Total current assets	​	5,349,752	​	10,445,511	​	1,559,473
Investments in equity investees	​	300,380	​	347,454	​	51,874
Property and equipment, net	​	5,866,534	​	5,983,268	​	893,278
Land use rights, net	​	1,194,308	​	1,179,776	​	176,136
Operating lease right-of-use assets	​	870,831	​	754,941	​	112,710
Goodwill	​	4,157,111	​	4,157,111	​	620,640
Deferred tax assets	​	650,709	​	733,337	​	109,484
Long-term investment	​	—	​	600,000	​	89,578
Long-term financing receivables, net	​	1,117,003	​	1,269,667	​	189,556
Other non-current assets	​	384,630	​	430,816	​	64,319
Total assets	​	19,891,258	​	25,901,881	​	3,867,048
Liabilities	​	​	​	​	​	​
Current liabilities:	​	​	​	​	​	​
Short-term bank borrowings	​	2,821,457	​	5,720,000	​	853,974
Accounts payable	​	1,556,649	​	1,421,204	​	212,180
Notes payable	​	129,920	​	—	​	—
Advances from customers	​	1,213,797	​	1,394,920	​	208,256
Income tax payable	​	—	​	12,330	​	1,841
Amounts due to related parties	​	14,434	​	41,625	​	6,214
Operating lease liabilities, current	​	238,973	​	204,664	​	30,556
Other current liabilities	​	2,555,280	​	4,544,369	​	678,456
Total current liabilities	​	8,530,510	​	13,339,112	​	1,991,477
Non-current operating lease liabilities	​	533,740	​	485,447	​	72,475
Deferred tax liabilities	​	112,543	​	104,860	​	15,655
Total liabilities	​	9,176,793	​	13,929,419	​	2,079,607

(1)

Included amounts due from other consolidated subsidiaries of RMB402,488 and RMB5,840,083 as of December 31, 2021 and June 30, 2022, respectively.

F-9

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

2. Summary of Significant Accounting Policies (Continued)

(b) Principles of consolidation (Continued)

​	Six months ended June 30,
​	2021		2022
​	RMB		RMB		US$
Total revenue	​	13,365,661	​	16,234,689	​	2,423,775
Net income(1)	​	381,265	​	1,296,627	​	193,581
Net cash used in operating activities(2)	​	(1,382,221)	​	(2,290,008)	​	(341,889)
Net cash used in investing activities	​	(533,004)	​	(469,058)	​	(70,029)
Net cash provided by financing activities	​	1,958,543	​	2,898,543	​	432,741
Net increase in cash and cash equivalents	​	43,318	​	139,477	​	20,823
Cash and cash equivalents and restricted cash at beginning of period	​	776,725	​	930,942	​	138,986
Cash and cash equivalents and restricted cash at end of period	​	820,043	​	1,070,419	​	159,809

(1)

Included inter-company transportation fees, service fees and rental fees charged by other consolidated subsidiaries of RMB7,114,246 and RMB7,660,720 for the for the six months ended June 30, 2021 and 2022, respectively.

(2)

Included inter-company operating cash outflow of RMB9,386,251 and RMB13,098,315 for the six months ended June 30, 2021 and 2022, respectively.

The WFOE is entitled to receive substantially all of the net income and transfer a majority of the economic benefits in the form of service fees from the VIEs. These inter-company transactions and balances were eliminated in the unaudited interim condensed consolidated financial statements.

After all intercompany transactions eliminations, the VIE contributed 96.9% and 98.0% of the Company’s consolidated revenues for the six months ended June 30, 2021 and 2022, respectively. As of December 31, 2021 and June 30, 2022, the VIE accounted for an aggregate of 31.0% and 29.3%, respectively, of the consolidated assets, and 66.3% and 78.4%, respectively, of the consolidated liabilities.

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company to provide financial support to the VIE. However, if the VIE was ever to need financial support, the Company may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIE or entrustment loans to the VIE.

The Company believes that there are no assets held in the consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and the PRC statutory reserves. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE.

Relevant PRC laws and regulations restrict the VIE from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.

(c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may

F-10

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

2. Summary of Significant Accounting Policies (Continued)

(c) Use of estimates (Continued)

differ from these estimates. The Company bases its estimates on historical experience and other relevant factors.

(d) Convenience translation

The Company’s business is primarily conducted in PRC and almost all of the Company’s revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into US dollars using the then current exchange rates, solely for the convenience of the readers outside PRC. Translations of balances in the unaudited interim condensed consolidated balance sheets, unaudited interim condensed consolidated statements of comprehensive income and unaudited interim condensed consolidated statements of cash flows from RMB into US dollars as of and for the six months ended June 30, 2022 were calculated at the rate of US$1.00 = RMB6.6981 representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on June 30, 2022. No representation was made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2022, or at any other rate.

(e) Revenue recognition

Disaggregation of revenue

​	Six months ended June 30,
​	2021				2022
​	RMB		%		RMB		US$		%
Express delivery services	​	12,325,745	​	89.3	​	15,151,869	​	2,262,114	​	91.5
Freight forwarding services	​	806,540	​	5.8	​	661,044	​	98,691	​	4.0
Sale of accessories	​	574,311	​	4.2	​	631,754	​	94,318	​	3.8
Others	​	91,001	​	0.7	​	116,060	​	17,328	​	0.7
Total revenues	​	13,797,597	​	100.0	​	16,560,727	​	2,472,451	​	100.0

Contract assets and liabilities

Contract assets include billed and unbilled receivables resulting from in-transit parcels, which were recorded in accounts receivable and not material as of December 31, 2021 and June 30, 2022.

Contract liabilities consist of advance payments as well as deferred revenue, which were recorded in advances from customers and not material as of December 31, 2021 and June 30, 2022.

(f) Income taxes

As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward by applying enacted statutory tax rates applicable to future years when the reported amounts of the asset or liability are expected to be recovered or settled, respectively. Deferred tax assets are

F-11

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

2. Summary of Significant Accounting Policies (Continued)

(f) Income taxes (Continued)

reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position.

According to ASC 740-270 Interim Reporting, an estimated annual effective tax rate (AETR) on full year estimated ordinary income should first be determined by the Company and the estimated AETR is then applied to year-to-date ordinary income to compute the interim tax provision on ordinary income.

(g) Earnings per share

Basic earnings per share are computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the periods.

Diluted earnings per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share equivalents are excluded from the computation of diluted earnings per ordinary share if their effects would be anti-dilutive.

On October 27, 2016, the Company’s shareholders voted in favor of a proposal to adopt a dual-class share structure, pursuant to which the Company’s authorized share capital were reclassified and redesigned into Class A ordinary shares and Class B ordinary shares. Both Class A ordinary shares and Class B ordinary shares are entitled to the same dividend right, as such, this dual class share structure has no impacts to the earnings per share calculation. Basic earnings per share and diluted earnings per share are the same for each Class A ordinary shares and Class B ordinary shares.

3. Property and Equipment, Net

Property and equipment, net consist of the following:

​	As of December 31, 2021		As of June 30, 2022
​	RMB		RMB		US$
Buildings	​	11,728,192	​	13,233,985	​	1,975,782
Machinery and equipment	​	6,378,741	​	6,801,804	​	1,015,483
Leasehold improvements	​	769,215	​	871,189	​	130,065
Vehicles	​	6,184,635	​	6,161,493	​	919,887
Furniture, office and electric equipment	​	765,551	​	777,509	​	116,079
Construction in progress	​	5,571,941	​	6,661,574	​	994,546
Total	​	31,398,275	​	34,507,554	​	5,151,842
Accumulated depreciation	​	(6,468,378)	​	(7,659,069)	​	(1,143,469)
Property and equipment, net	​	24,929,897	​	26,848,485	​	4,008,373

Depreciation expenses were RMB1,026,582 and RMB1,242,220 for the six months ended June 30, 2021 and 2022, respectively.

F-12

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

3. Property and Equipment, Net (Continued)

As at December 31, 2021 and June 30, 2022, the title certificates for certain buildings of the Company with an aggregate net book value of approximately RMB6,555,658 and RMB4,956,086, respectively, had not been obtained.

4. Short-term Bank Borrowings

Short-term bank borrowings consist of the following:

​	As of December 31, 2021		As of June 30, 2022
​	RMB		RMB		US$
The PRC domestic commercial banks	​	2,821,457	​	5,720,000	​	853,974
Oversea commercial banks	​	637,260	​	1,339,620	​	200,000
Total	​	3,458,717	​	7,059,620	​	1,053,974

The weighted average interest rates of the short-term bank borrowings were 2.97% and 2.46% for the six months ended June 30, 2021 and 2022, respectively. Certain borrowings are subject to financial covenants such as liability/asset ratio less than 65% and current ratio not less than 0.8. As of June 30, 2022, the Company was in compliance with the financial covenants. The borrowings are repayable within one year.

5. Income Tax

The current and deferred portion of income tax expenses included in the unaudited interim condensed consolidated statements of comprehensive income, which were substantially attributable to the Company’s subsidiaries, are as follows:

​	Six months ended June 30,
​	2021		2022
​	RMB		RMB		US$
Current tax expenses	​	599,244	​	679,202	​	101,402
Deferred tax (benefits)/expenses	​	(194,747)	​	14,222	​	2,123
Total	​	404,497	​	693,424	​	103,525

The effective tax rate is based on expected income and statutory tax rates. For interim financial reporting, the Company estimates the annual effective tax rate based on projected accounting incomes for the full year and records a quarterly income tax provision in accordance with the guidance on accounting for income taxes in a period. As the year progresses, the Company refines the estimates of the year’s taxable income as new information becomes available. This continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate.

The Company’s effective tax rate for the six months ended June 30, 2021 and 2022 were 18.07% and 20.75%, respectively.

6. Share Based Compensation

Employee Share Holding Platform

In June 2016, the Company established an employee share holding platform (the “Share Holding Platform”). The purpose of the Share Holding Platform is to allow employees of the Company in PRC to receive equity

F-13

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

6. Share Based Compensation (Continued)

share incentives. ZTO ES Holding Limited (“ZTO ES”), a British Virgin Islands company was established as a holding vehicle for the Company’s Share Holding Platform. ZTO ES is held by Mr. Lai Meisong, chairman and chief executive officer of the Company and four limited liability partnerships (“LLPs”) formed in PRC. At the time of establishment of these LLPs, Mr. Lai Meisong and his wife, Ms. Lai Yufeng agreed to serve as the general partner and sole limited partner of the four LLPs. On behalf of the Company and subject to approval of board of director of the Company, Mr. Lai Meisong as the general partner of the LLPs, has the authority to select the eligible participants to whom awards will be granted.

On June 28, 2016, the Company issued 16 million ordinary shares to ZTO ES. All shareholder rights associated with these 16 million ordinary shares including but not limited to voting right and dividend right were waived until such time when the economic interests in the ordinary shares are granted to the employees, through transfer of interests in the LLPs. Pursuant to the terms of the partnership agreement, a recipient of limited partnership interests is entitled to indirectly all of the economic rights associated with the underlying ordinary shares of the Company and accordingly, at the direction of the employee, the LLPs will sell the Company’s ordinary shares held in connection with the limited partnership interest owned by the employee, and remit the proceeds to the employee. The other shareholder’s rights associated with the Company’s ordinary shares held by the partnership may be exercised by the general partner of these LLPs. The Company referred to these limited partner’s partnership interests as ordinary share units and five ordinary share units correspond to the indirect economic interest in one ordinary share of the Company.

In March 2021 and 2022, 3,178,835 and 3,934,355 ordinary share units corresponding to 635,767 and 786,871 Company’s ordinary shares were granted to certain officers and employees at the consideration of nil. These share awards vested immediately upon grant. The Company recorded the share based compensation of RMB135,778 and RMB109,614 based on the market price at US$32.83 and US$21.87 of ordinary shares on the grant date for six months ended June 30, 2021 and 2022, respectively.

2016 Share Incentive Plan

On June 20, 2016, the Board also approved a 2016 share incentive plan (the “2016 Share Incentive Plan”) in order to provide appropriate incentives to directors, executive officers and other employees of the Company, pursuant to which the maximum number of shares of the Company available for issuance pursuant to all awards under the 2016 Share Incentive Plan shall be 3,000,000 ordinary shares.

In September 2016, the Board approved 2016 Share Incentive Plan (as amended and restated), the maximum aggregate number of shares which may be issued pursuant to all awards under the 2016 Plan is initially 3,000,000, plus an annual increase, by an amount equal to the least of (i) 0.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 3,000,000 shares or (iii) such number of shares as may be determined by the board of directors.

Restricted share units

On March 2021 and 2022, the Company granted 525,595 and 497,956 RSUs to certain director, executive offices and employees pursuant to the 2016 Share Incentive Plan. These grants are vested immediately upon grant. The Company recorded the share based compensation of RMB112,249 and RMB69,367 based on the market price of ordinary shares at US$32.83 and US$21.87 on the grant date for the six months ended June 30, 2021 and 2022, respectively.

F-14

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

7. Earnings Per Share

Basic and diluted earnings per share for each of the periods presented are calculated as follows:

​	Six months ended June 30,
​	2021		2022
​	RMB		RMB		US$
Numerator:	​	​	​	​	​	​
Net income attributable to ordinary shareholders in computing basic and diluted earnings per share	​	1,825,797	​	2,711,451	​	404,810
Shares (Denominator):	​	​	​	​	​	​
Weight average ordinary shares outstanding – basic	​	827,755,090	​	809,214,926	​	809,214,926
Weight average ordinary shares outstanding – diluted	​	827,755,090	​	809,214,926	​	809,214,926
Earnings per share – basic	​	2.21	​	3.35	​	0.5
Earnings per share – diluted	​	2.21	​	3.35	​	0.5

6,811,546 and 6,024,675 ordinary shares transferred to ZTO ES were considered issued but not outstanding as of June 30, 2021 and June 30, 2022, respectively, and therefore not included in the calculation of basic and dilutive earnings per share.

8. Related Party Transactions

The table below sets forth the major related parties and their relationships with the Company:

Name of related parties	Relationship with the Company
Tonglu Tongze Logistics Ltd. and its subsidiaries	Majority equity interests held by the employees of the Company
Shanghai Mingyu Barcode Technology Ltd.	Controlled by brother of chairman of the Company
Shanghai Kuaibao Network Technology Ltd.	The Company’s equity investee
ZTO Supply Chain Management Co., Ltd. and its subsidiaries	The Company’s equity investee
ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries	The Company’s equity investee
ZTO Yun Leng Network Technology (Zhejiang) Co., Ltd. and its subsidiaries	The Company’s equity investee
Zhejiang Tongyu Intelligent Industry Development Co., Ltd.	The Company’s equity investee
Zhongkuai (Tonglu) Future City Industrial Development Co.,Ltd	Controlled by chairman of the Company
Youmi Technology (Zhejiang) Co., Ltd.	The Company’s equity investee
Tonglu Antong Enterprise Management Partnership and its subsidiaries	The Company’s equity investee
Tuxi Honor Holding Limited	Controlled by brother of chairman of the Company
ZTO Freight (Cayman) Inc. and its subsidiaries	The Company’s equity investee

F-15

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

8. Related Party Transactions (Continued)

(a) The Company entered into the following transactions with its related parties:

​	Six months ended June 30,
Transactions	2021		2022
​	RMB		RMB		US$
Revenues:	​	​	​	​	​	​
Transportation revenue from ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries	​	26,642	​	201,871	​	30,139
Express delivery service revenue derived from Tonglu Antong Enterprise Management Partnership and its subsidiaries	​	—	​	308,503	​	46,058
Others	​	1,715	​	51,435	​	7,679
​	​	28,357	​	561,809	​	83,876
Cost of revenues:	​	​	​	​	​	​
Transportation service fees paid to Tonglu Tongze Logistics Ltd. and its subsidiaries	​	50,374	​	127	​	19
Transportation service fees paid to ZTO Supply Chain Management Co., Ltd. and its subsidiaries	​	39,326	​	47,247	​	7,054
Transportation service fees paid to ZTO Freight (Cayman) Inc. and its subsidiaries	​	—	​	31,743	​	4,739
Transportation service fees paid to ZTO Yun Leng Network Technology (Zhejiang) Co., Ltd. and its subsidiaries	​	—	​	29,756	​	4,442
Purchases of supplies from Shanghai Mingyu Barcode Technology Ltd.	​	98,937	​	117,462	​	17,537
Others	​	11,345	​	34,328	​	5,125
​	​	199,982	​	260,663	​	38,916
Other operating income:	​	​	​	​	​	​
Rental income from ZTO Supply Chain Management Co., Ltd. and its subsidiaries	​	18,189	​	6,892	​	1,029
Rental income from ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries	​	16,117	​	11,474	​	1,713
Others	​	5,924	​	4,683	​	699
​	​	40,230	​	23,049	​	3,441
Other income:	​	​	​	​	​	​
Interest income derived from Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd	​	19,811	​	16,981	​	2,535
Others	​	66	​	2,657	​	397
​	​	19,877	​	19,638	​	2,932

In the six months ended June 30, 2021 and 2022, the Company purchased trucks from Tonglu Tongze Logistics Ltd. and its subsidiaries at an aggregate price of nil and RMB53,626, respectively.

In June 2022, Tuxi Honor Holding Limited made RMB190,901 capital injection to one of the Company’s subsidiary.

F-16

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

8. Related Party Transactions (Continued)

(b) The Company had the following balances with its related parties:

​	As of December 31,		As of June 30,
​	2021		2022
​	RMB		RMB		US$
Amounts due to related parties	​	​	​	​	​	​
Shanghai Mingyu Barcode Technology Ltd.	​	3,049	​	9,577	​	1,430
ZTO Supply Chain Management Co., Ltd. and its subsidiaries	​	9,983	​	10,211	​	1,524
Tonglu Antong Enterprise Management Partnership and its subsidiaries	​	9,751	​	24,099	​	3,598
Others	​	3	​	3	​	1
Total	​	22,786	​	43,890	​	6,553

Amounts due to related parties consisted of accounts payable to related parties for transportation, waybill material and deposits as of December 31, 2021 and June 30, 2022, respectively.

​	As of December 31,		As of June 30,
​	2021		2022
​	RMB		RMB		US$
Amounts due from related parties	​	​	​	​	​	​
ZTO Cloud Warehouse Technology Co., Ltd. and its subsidiaries(1)	​	41,118	​	45,616	​	6,810
Tonglu Tongze Logistics Ltd. and its subsidiaries	​	22,262	​	21,160	​	3,159
Youmi Technology (Zhejiang) Co., Ltd(5)	​	14,494	​	7,545	​	1,126
Zhongtong Yunleng Network Technology (Zhejiang) Co., Ltd. and its subsidiaries(2)	​	49,501	​	49,992	​	7,464
Shanghai Kuaibao Network Technology Ltd.(3)	​	6,510	​	6,600	​	985
Others	​	105	​	2,449	​	366
Total	​	133,990	​	133,362	​	19,910
Amounts due from related parties-non current	​	​	​	​	​	​
Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd(4)	​	539,000	​	557,000	​	83,158
Zhejiang Tongyu Intelligent Industry Development Co., Ltd.(4)	​	72,100	​	74,620	​	11,140
Total	​	611,100	​	631,620	​	94,298

(1)

The amount comprised loan to related parties with no interest bearing and accounts receivable generated from the transportation service provided by the Company.

(2)

The amount comprised other receivable generated from disposal of subsidiaries and net off account payable generated from the transportation service that the subsidiaries provided to the Company.

(3)

Amounts due from related parties were loans to related parties with no interest bearing.

F-17

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

8. Related Party Transactions (Continued)

(b) The Company had the following balances with its related parties: (Continued)

(4)

The amount comprised three-year loans to this related party with 7.2% annualized interest rate. The balance of principle was RMB500,000 as of December 31, 2021 and June 30, 2022 in relation to the loan to Zhongkuai (Tonglu) Future City Industrial Development Co., Ltd. The balance of principle was RMB70,000 as of December 31, 2021 and June 30, 2022 in relation to the loan to Zhejiang Tongyu Intelligent Industry Development Co., Ltd., respectively.

(5)

The amount comprised a one-year loan to this related party with 6.6% annualized interest rate. The balances of principle were RMB10,000 as of December 31,2021 and RMB5,000 as of June 30, 2022 in relation to the loan to Youmi Technology (Zhejiang) Co., Ltd..

9. Commitments and Contingencies

Capital commitments

The Company’s capital commitments primarily relate to commitments on construction of office building, sorting hubs and warehouse facilities. Total capital commitments contracted but not yet reflected in the consolidated financial statements amounted to RMB5,813,823 and RMB6,036,231 as of December 31, 2021 and June 30, 2022, respectively. All of these capital commitments will be fulfilled in the following years based on the construction progress.

Investment commitments

The Company is committed to make further capital injection into certain investments in equity investees. Such investment commitment amounted to approximately RMB124,410 as of December 31, 2021 and June 30, 2022.

Contingencies

The Company is subject to periodic legal or administrative proceedings in the ordinary course of business. The Company does not believe that any currently pending legal or administrative proceeding to which the Company is a party will have a material effect on its business or financial condition.

The Company has not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations, but the Company has recorded accruals for the estimated underpaid amounts in the consolidated financial statements. However, the Company has not made any accruals for the interest on underpayments and penalties that may be imposed by the relevant PRC government authorities in the consolidated financial statements as the Company believes it would be unlikely that the relevant PRC government authorities will impose any significant interests or penalties.

The Company, certain directors and officers of the Company, and the underwriters of the Company’s initial public offering in October 2016 have been named as defendants in a putative securities class actions. Management of the Company believes that the claims are without merit and intends to defend vigorously.

10. Repurchase of Ordinary Shares

On March 31, 2021, the board of directors approved changes to the share repurchase program, increasing the aggregate value of shares that may be repurchased from US$500 million to US$1 billion and extending the effective time by two years through June 30, 2023. The Company expects to fund the repurchases out of its existing cash balance. As of June 30, 2022, the Company had purchased an aggregate of 36,074,242 ADSs at an average purchase price of US$25.21, including repurchase commissions, which had been fully paid as of June 30, 2022.

F-18

ZTO EXPRESS (CAYMAN) INC.

NOTES TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2022
(Amounts in thousands, except for share and per share data)

11. Employee Benefit Plans

The Company’s PRC subsidiaries are required by law to contribute certain percentages of applicable salaries for retirement benefits, medical insurance benefits, housing funds, unemployment and other statutory benefits for full time employees. The Company contributed RMB178,104 and RMB213,222 for the six months ended June 30, 2021 and 2022, respectively, for such benefits and has no legal obligation for the benefits beyond the contribution made. The PRC government is responsible for the medical benefits and ultimate liability to those employees.

12. Segment Information

The Company has only one reportable segment since the Company does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.

The Company’s chief operating decision maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole. The Company does not distinguish among markets or segments for the purpose of internal reports.

The majority of the Company’s revenues for the six months ended June 30, 2021 and 2022 were generated from the PRC. As of December 31, 2021 and June 30, 2022, the majority of the long-lived assets of the Company are located in the PRC, and therefore no geographical segments are presented.

F-19